Crystal ball gazing is invariably a perilous activity, especially in areas such as the economy, politics, and drug pricing reform, that are so prone to confounding factors. Despite this, it’s a useful exercise to predict, given what we know – historical precedent – and how we then expect the future to unfold.
In this post I’ll make some predictions on politics, the economy, and drug pricing reform, while a second post forecasts Covid-19 developments and public health.
Predictions on the economy and the 2022 midterms
The economy is experiencing an uneven recovery from the effects of the Covid-19 pandemic. Employment numbers have been robust for quite some time, and wages are increasing. But, inflation is stubbornly high, and labor and supply chain shortages threaten to hold back growth in certain sectors. And, while the stock market boom is consolation to some, there is a disconnect between what’s happening on Main versus Wall Street.
Moreover, globally there’s considerable uncertainty, exacerbated by a large set of unknowns. In fact, the biggest risks to the economy may come from geopolitical shocks: A Russian invasion of Ukraine, for example; China harassing Taiwan; tension on the Korean peninsula.
Ten months before the midterm election many pundits are predicting a Republican rout of Democrats in Congress. Well, this could very well happen. After all, President Biden’s approval ratings are poor. In addition, there are numerous vulnerable seats in Congress which Democrats will have trouble holding.
Nevertheless, 10 months are an eternity in politics. And the winds of fortune can change on a dime. Covid-19 could fade in 2022, the economy may continue to produce robust employment numbers, and inflation may diminish from its current peak. Moreover, enactment of the infrastructure bill and the possibility of passage of a slimmed down version of the budget reconciliation bill – or Build Back Better Act – could yield tangible results.
Indeed, I’ll go against the grain here and predict a sustained economic recovery with diminishing inflation (from its current peak), along with midterm election results in which Democrats maintain a slim majority in the House and a 50-50 Senate. The problem for Republicans may be that in lieu of offering constructive alternative plans on healthcare, childcare, education, infrastructure, climate change, and a host of other critical issues, they’re stuck opposing any government intervention on ideological grounds. For independents and swing voters pragmatism trumps ideology.
Drug pricing and reimbursement
For those expecting major changes in 2022 to pricing and reimbursement of pharmaceuticals landscape, they may be disappointed. The most consequential potential change to the drug pricing system – the overhaul of pharmacy benefit manager (PBM) rebates, with attendant 100% pass-through to beneficiaries – won’t happen. The Biden Administration has essentially nixed former President Trump’s executive order calling for a 100% pass-through of rebates. And, PBM rebate reform is not even stipulated in the budget reconciliation bill, or the Build Back Better Act.
Given that Senator Manchin (D-WV) has said “no” to the Build Back Better Act, the legislation’s prospects look dire. But, the bill isn’t dead yet. Senator Manchin may change his mind. He may in fact be using his “no” as a bargaining chip. A truncated budget reconciliation bill has a strong likelihood of passing.
Alternatively, popular pieces of the bill could be put forward, not in the form of budget reconciliation legislation, rather, as separate smaller bills that go through the regular process of law making.
These could include several of the drug pricing provisions as well as restructuring of the Medicare Part D (outpatient) benefit, as these are very popular among constituents. Moreover, there is strong support for certain measures, such as a $35 cap on monthly insulin out-of-pocket expenses, and a $2,000 maximum annual out-of-pocket costs for Medicare beneficiaries.
In Congress, there is also bipartisan support for shifting a substantial portion of cost management in the catastrophic phase of the Medicare Part D benefit to Part D plans rather than the federal government.
As a reminder, the prescription drug proposals included in the Build Back Better Act would allow the federal government to negotiate prices for a small number of high-cost drugs covered under Medicare Parts B and D, specifically drugs that no longer enjoy exclusivity and have no competition. Starting in 2025, 10 drugs would be selected, rising to 20 by 2028. The negotiation process would also apply to all insulin products.
The proposal establishes an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the non-federal average manufacturer price; for example, 75% for small-molecule drugs more than 9 years but less than 12 years after FDA approval.
Notable exemptions include drugs that are less than 9 years (for small-molecule drugs) or 13 years (for biologics) from their FDA approval date, drugs with an orphan designation as their only FDA-approved indication, and “small biotechnology drugs” through 2027. These drugs are defined as accounting for 1% or less of Part D or Part B spending and account for 80% or more of the revenue of the small biotechnology manufacturer’s portfolio of approved drugs.
Even without legislation, the marketplace will continue to evolve in ways that put pressure on net drug prices. Payers in both the commercial and public spaces will increasingly resort to utilizing clinical- and cost-effectiveness to determine pricing and reimbursement of prescription drugs.
So, for example, state Medicaid policymakers have been actively pursuing ways to apply Institute for Clinical and Economic Review’s (ICER) research findings to help manage their prescription drug expenditures. The Kaiser Family Foundation found that at least 35 different states now review comparative effectiveness studies when determining their coverage criteria, with the most commonly cited studies published by ICER.
Also, biosimilars will gain even more traction across multiple therapeutic categories. Biosimilar uptake will steadily rise in 2022, and may accelerate further in 2023, for two reasons. First, more biosimilars are being approved – the most recent example being the insulin glargine biosimilar Rezvoglar in late December. Second, therapeutic interchangeability status will spur automatic pharmacy substitution.* The therapeutically interchangeable long-acting insulin product Semglee (which references insulin glargine) may offer lessons for future biosimilar launches, including biosimilars that reference Humira (adalimumab), which will be coming on board in 2023.
All in all, 2022 promises nothing earth-shattering politically or economically. On drug pricing and reimbursement, a combination of market-driven moves and legislative retooling of, among other things, insulin out-of-pocket costs, will lead to some modest changes.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
